Self-Employed Loans Explained

For all the advantages of being your own boss, chances are if you’re self-employed you could well have found it difficult to get finance. Lenders tend to want a great deal of detail on proof of income, to know all about your credit history, and you’re often asked to show bank statements as proof of what comes in and out of your account. But it’s good to know, even in these most cautious of times, there are still many lenders who are happy to lend to you – even if you’re a sole trader.

At Better Chance Finance we like to take the hassle out of getting a loan, as we feel that everyone should have a better chance at getting what they need to help them make it happen – from home improvements to paying for a wedding – whatever you want to spend on, we can help find the right loan, all through one simple loan application.

Let’s look at some key questions you might have about self-employed loans:


What if I’ve got a bad credit history?

Don’t worry, we work with many customers worried about their credit history. While this can definitely limit the loans available to you, we work with several lenders who actually specialise in lending to people with a poorer credit history, and they might be able to help you find a loan with a competitive interest rate, even with bad credit.


How long do negative issues affect your credit history?

Problems like defaults and CCJs are likely stay on your credit history for six years, and some people leave trying to get a personal loan / self-employed until after this time. That said, lenders generally won’t pay as much attention to problems on your credit history if they were a few years ago, so long as you’ve not had issues since. One of the best ways to improve your credit history is to always make sure you keep up to date with any monthly repayments.


Should I get an unsecured loan?

If you’re looking to borrow a relatively small amount of money, you’ll probably want to apply for a personal loan – also called an ‘unsecured loan’. These types of loans aren’t secured against property (like they usually are for a secured loan) so they could be suitable, and with less risk involved. The downside being that compared to a secure loan, you’re unlikely to get a large total amount, usually they’re up to around £5,000.

As unsecured loans aren’t secured against a property, this can mean they’re only an option for people with a better credit history. But whether your credit history is top notch or not, this shouldn’t stop you applying and seeing what you could get – applying with Better Chance Finance only takes minutes.


What’s a secured loan?

A secured loan involves putting an asset (this is usually your house) against the loan – this means that if you aren’t able to pay your monthly repayments over time, your house could be repossessed. Although there’s definitely more risk with these loans, if you’re confident you can meet the monthly repayments, they can be a good option.


As the lender has the home as security, they’re likely to give a lower interest rate, and you’re also more likely to get one than a personal loan, even with a bad credit history.


How much will I be able to get?

The total amount you’ll be able to borrow will depend on several details, for instance:

  • How much you earn, and if you have good detailed books (accountancy records) to show your proof of income
  • How long you’ve been self-employed / a sole trader for
  • Your credit history
  • If you have a guarantor, as guarantor loans are sometimes an option


What will I need as proof of income?

When you’re an employee at a company, your payslips are your proof of income – so showing what you earn is usually pretty straightforward. When you’re self-employed though, things can be a little trickier, and you’ll need to demonstrate you can meet the monthly repayments you’ll have with several documents, which could include:

  • Bank statements – you’ll probably be asked for at least the last three months.
  • Your self-employed registration number – to show that you’ve gone through the official channels to register as self-employed / a sole trader.
  • Your annual books / tax submission details – if you have a book-keeper or an account you can ask them for these, some lenders look for three years of books, but others are much more flexible.
  • Details from your guarantor of their proof of income – if you’re looking into guarantor loans.


What can I spend my self-employed loan on?

This is where we can’t really advise – as really it’s up to you! From home improvements to holidays, so long as you meet your monthly repayments, you get to enjoy your money your way.